CrowdStrike Holdings cut fiscal 2025 guidance across the board in the wake of a widespread IT outage on July 19 caused by a defective software update for corporate customers. CrowdStrike stock rose as July-ended quarter financial results came in above expectations amid the modest guidance cut.
Many analysts had anticipated a CrowdStrike guidance cut in the aftermath of the global IT outage. The Sunnyvale, Calif.-based cybersecurity firm reported second quarter earnings after the market close on Wednesday.
On the stock market today, CrowdStrike stock rose 3.4% to near 273 in midday trading. Heading into the CrowdStrike earnings report, CrowdStrike stock was up 4% in 2024, down from a 56% gain on July 9, before the IT outage.
"The midpoint of fiscal 2025 revenue guidance fell $98 million below prior guidance," said TD Cowen analyst Shaul Eyal in a report. "CrowdStrike expects topline re-acceleration by (calendar) January 2026. CrowdStrike's longer-term story remains intact. Also, CrowdStrike is maintaining its target of achieving $10 billion in ARR (annual recurring revenue) by the end of fiscal 3031."
At Oppenheimer, analyst Ittai Kidron said in a report: "Looking ahead, while we expect the stock to remain range-bound until investors gain greater clarity around fiscal 2026 growth trends and the timing of new ARR re-acceleration, we believe CrowdStrike's long-term growth opportunity remains intact."
At JPMorgan, analyst Brian Essex also holds an upbeat long-term view.
"Initially we expect outage-related headwinds to revenue, ARR, profitability and free cash flow over the next four quarters," Essex said in a report. "We look forward to the company's investor briefing at Fal.Con in September for more detail and disclosure. Meanwhile, we anticipate the efficacy and efficiency of CRWD's model will enable the company to reaccelerate toward better growth and profitability as it laps headwinds in the back half of next year, with normalized growth, profitability and cash flow the year after."
CrowdStrike Earnings Rise 41%
CrowdStrike earnings for the July quarter climbed 41% to $1.04 a share on an adjusted basis. Revenue, including acquisitions, rose 32% to $963.9 million.
Analysts polled by FactSet had predicted earnings of 97 cents a share on revenue of $958.3 million.
With CrowdStrike, Wall Street focuses on annual recurring revenue, or ARR. It's a key financial metric tied to subscription services growth.
Amid the IT outage, analysts expected lower growth for "net new" ARR because of delays in signing contracts and expectations that many customers will seek price discounts when renewing contracts to help cover the cost of business disruptions.
CrowdStrike Stock: New Fiscal 2025 Guidance
CrowdStrike's negotiations with customers over pricing concessions are expected to play out through 2025 and perhaps beyond.
In Q2, total ARR increased 32% to $3.86 billion. Analysts had predicted total ARR of $3.85 billion. New ARR came in at $218 million versus lowered consensus estimates of $195.5 million.
In the October quarter, CrowdStrike said it expects EPS in a range of 80 cents to 81 cents and revenue in a range of $979.2 million to $984.7 million. Analysts had predicted Q3 revenue of $1.01 billion.
It forecast fiscal 2025 EPS in a range of $3.61 to $3.65 and revenue in a range of $3.89 billion to $3.9 billion.
Analysts consensus estimate for fiscal 2025 had been lowered to EPS of $3.90 on revenue of $3.955 following the IT outage. Management did not provide fiscal 2025 ARR guidance.
CRWD Stock: Deal Closings Delayed
At William Blair, analyst Jonathan Ho said in a report: "CrowdStrike had roughly $60 million in deal closings shift from the second quarter to the second half of the year. It anticipates additional scrutiny and elongated sales cycles. At the same time, the company will offer a combination of additional products, flexible payment terms, and longer duration contracts to customers. That will impact revenue by about $30 million for each quarter in the second half as well as continuing into the first half of the next fiscal year. The company is not experiencing significant departures from customers or efforts to diversify their deployments given the goodwill built up with CrowdStrike over many years and challenges in switching. "
Further, CrowdStrike competes with Palo Alto Networks, SentinelOne, Microsoft and others in the "endpoint" market. Endpoint security tools detect malware on laptops, mobile phones and other devices that access corporate networks.
Also, CrowdStrike is building a broad, threat-detection cybersecurity platform called XDR, or extended detection and response. It monitors endpoints as well as web/email gateways, web application firewalls and cloud business workloads.
Also, CRWD stock is among cybersecurity stocks to watch.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
